ANTIQUES SHOPS

* Revenue falls 2 pct

* Fixed income rev up 31 pct; investment banking down 10 pct

* Asset management fees, income from funds down 82 pct

* Shares rise 3 pct (Adds details from conference call, analyst comments, updates share movement)

By Tanya Agrawal

June 19 (Reuters) - Investment bank Jefferies Group Inc's profit beat muted Wall Street expectations, helped by a strong performance by its fixed income business as investors sought safety in bonds.

As the first investment bank to report earnings, Jefferies is often viewed as an indicator for larger Wall Street banks such as Goldman Sachs Group and Morgan Stanley.

Analysts have cut their targets on several investment banks over the last two months due to weak equity markets and a growing crisis in Europe.

Jefferies has been looking to expand overseas and is reportedly planning to establish a European financing arm this year in an effort to grab market share from rivals scaling back corporate lending.

"In Europe, we're seeing capital markets start to take share from the banks in terms of debt financing and that's definitely something that is giving us some momentum in investment banking and fixed income in that region," a company executive said in a post-earnings conference call with analysts.

Although Jefferies' fixed income business held up well during the quarter, its investment banking and asset management business failed to live up to the expectations.

Fixed income revenue rose 31 percent to $293 million, while investment banking revenue fell 10 percent to $297 million.

(For a Breakingviews column on Jefferies )

The midsized investment bank earned $63.5 million, or 28 cents per share, compared with $80.6 million, or 36 cents per share, a year earlier. Revenue fell 2 percent to $711 million.

Excluding items related to its acquisition of historic British stockbroker Hoare Govett from Royal Bank of Scotland and other items, the company earned 31 cents per share.

Analysts had expected the company to earn 28 cents per share, according to Thomson Reuters I/B/E/S.

"It's earnings won't really see any momentum on the upside till the fall, because it will be unable to outperform the weak markets," said Richard Bove, analyst with Rochdale Securities.

Jefferies shares had come under intense pressure after brokerage MF Global Holdings Ltd filed for bankruptcy in October 2011 as investors worried that Jefferies might have similar troubles.

The company has since taken steps to boost investor confidence by selling billions of dollars worth of Greek, Irish, Italian, Portuguese and Spanish debt in a matter of days.

Shares of the New-York based company, which have fallen about 6 percent since the beginning of the year, rose 3 percent to $13.53 on Tuesday morning on the New York Stock Exchange. (Reporting by Tanya Agrawal in Bangalore; Editing by Supriya Kurane)

* FOMC begins two-day policy meeting

* Oracle climbs after results

* Dow up 0.9 pct, S&P up 1.1 pct, Nasdaq up 1.2 pct

By Angela Moon

NEW YORK, June 19 (Reuters) - U.S. stocks rose on Tuesday on hopes that the Federal Reserve's policymakers will agree on extending stimulus measures as the economy struggles to recover.

A sharp decline in German business sentiment, alongside stubbornly high Spanish bond yields, raised expectations for market-friendly stimulus from European policymakers as well.

"We went to the highs of the day on that, and we have the Fed tomorrow. This is a bailout, central bank largesse bounce, and we'll see what follow-through (occurs) after the Fed tomorrow and whatever becomes of the ESM," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

British media reports earlier had said German Chancellor Angela Merkel was poised to use Europe's dual bailout funds, known as the European Financial Stability Facility or the EFSF and the European Stability Mechinism or the ESM, to buy up the debt of countries like Italy and Spain and had discussed the plans at the summit. But a German government official told Reuters there was no discussion at a G20 summit in Mexico this week about using Europe's rescue funds to buy up the bonds of stricken members of the euro zone.

The Dow Jones industrial average was up 112.20 points, or 0.87 percent, at 12,854.02. The Standard & Poor's 500 Index was up 14.27 points, or 1.06 percent, at 1,359.05. The Nasdaq Composite Index was up 35.10 points, or 1.21 percent, at 2,930.43.

The S&P 500 has gained more than 7 percent from a five-month low hit earlier in June, and is on track to close above its 50-day moving average for the first time in seven weeks. But the sharp gains also leave the market vulnerable if the outcome of Wednesday's Fed meeting doesn't meet market expectations.

Growth-related stocks led the rally, with the S&P materials sector index up 2 percent and the financial sector index up 1.7 percent. U.S. Steel Corp jumped 7.6 percent to $19.80 and Bank of America added 4.6 percent to $8.12.

On Tuesday, the Federal Open Market Committee began the first day of a two-day meeting on interest-rate policy. The meeting got under way with expectations increasing that the U.S. central bank may extend its "Operation Twist" program, its effort to drive down long-term borrowing costs.

"People are anticipating some type of response from the Fed tomorrow and are buying or covering shorts in anticipation of that," said Paul Zemsky, head of asset allocation at ING Investment Management in New York. "There's a risk the market gets disappointed."

Spain's government bond yields eased slightly after it raised 3 billion euros at a short-term debt sale, with the higher yields enticing investors. However, with its 10-year bond yield above 7 percent, investors worried over how long the euro zone's fourth-largest economy can survive without foreign help.

In Greece, parties promised to form a coalition government soon and seek concessions from the country's EU and IMF lenders on an austerity program that is both keeping the country away from bankruptcy and mired in a very long recession.

Oracle Corp rose 3.3 percent to $28.01 a day after it reported stronger-than-expected quarterly profit, releasing the results three days ahead of schedule after news of the pending departure of a senior sales executive fueled concerns that business was stagnating.

Walgreen Co tumbled 5.6 percent to $30.17 after the pharmacy chain reported quarterly earnings and said it would buy a 45 percent stake in Alliance Boots for $6.7 billion in a cash-and-stock deal.

FedEx Corp rose 3 percent to $91.17 after the package delivery company reported fourth-quarter earnings and provided an outlook for the first quarter and 2013.

Shares of J.C. Penney dropped 8.3 percent to $22.30 a day after its president abruptly left the department store operator following a botched advertising campaign.

Economic data showed U.S. housing starts fell in May from a 3-1/2 year high, but permits to build new homes rose sharply, suggesting the housing recovery remains on track.